No interest rate cut until early next year

The rebound in third-quarter GDP likely means that the Bank of Canada will leave its economic projections and policy interest rate unchanged next Wednesday. But policymakers will still have doubts about the underlying strength of the economy, especially now considering the added uncertainty around trade policy and tightening financial conditions. If the latter triggers a housing downturn as we expect, then the Bank would have no choice but to cut interest rates to 0.25%, from 0.50%, possibly in the first quarter next year.